Non-Practicing Entities: If You Have a Scanner, You May Be One

The patent system is supposed to be a tool to provide inventors a way to benefit from their hard work and to gain some element of protection in the marketplace. Unfortunately, there are entities that take advantage of the letter of the law by buying ownership rights to patents in order to squeeze licensing revenue out of them. These entities often don't practice the invention themselves (hence they are politely referred to as Non-Practicing Entities or NPEs, rather than patent trolls). But they are out to monetize a patent by enforcing its claims against those parties that are practicing the invention

Their methodology is simple: find patents with broad, vague language that can be applied to a wide variety of situations; buy the rights to those patents; target as many licensees as possible, preferably those not big enough to put up a serious fight but still able to afford a good license fee; and send cease and desist letters to these targets that demand payment of a license fee large enough to make it worth the NPE's while, but not so large that the target would rather pay an attorney to fight the demand. The patents are licensed to a number of shell companies that have a common office location. The demand and license letters often come out of law firms located in jurisdictions in Texas known to have a particularly speedy patent trial system.

Regional Employers at RiskOne particular line of demands that appears to be making its rounds in Northwestern Pennsylvania relates to patents that have claims related to "computer data management" systems and methods. In this case, letters are being sent to businesses that are claimed to be using a scanner or copier that can scan a document into an electronic file and transmit that file to an e mail system. This combination is said to be violating their patents.

After two attempts to solicit a license from the business, a third letter from a law firm is sent, this time with an attached draft "Complaint" addressed to the local Federal District Court. The letter threatens to file the Complaint if the business doesn't respond to the license request. Different versions of the Complaint have been uncovered and examined, and all of the versions are essentially identical, with the exception that the target's name and address is changed. It's also been noted that some versions of the Complaint cite different shell companies as being the "exclusive licensee" of the rights claimed under the patents. These companies, suspiciously, have the same mailing address. The Complaint lays out a claim of infringement of the patent claims based on employees of the target business using scanners as described using a Microsoft Outlook system to send e-mails from the scanner to the employee's e-mail address. But it carefully states that it doesn't allege that Microsoft is infringing any of its patents.

Getting letters like this can be a scary, intimidating experience. But that's the point: get the target scared enough to respond. They will even encourage the target to contact a patent attorney. If the patent attorney has never seen such a letter, he/she will tell you that patent litigation is expensive: It can cost upwards of $1,000,000 (that's one million U.S. dollars) to fully litigate a simple patent with no guarantee of success. That often scares people into acquiescing with the demand and paying for a license. But that's not the way to deal with these claims. Find someone who's been there before and find out what they did to get out of the situation. Often it's possible to get the troll to back off and drop the suit by threatening to bring in those parties that got you to use the system in the first place: the scanner manufacturers and even Microsoft. In any case, you cannot ignore these letters and you must respond. It only remains to determine what your response will be.

For more information about patent trolls, please contact attorney Jonathan M. D'Silva at 814-870-7715 or jdsilva@mijb.com.

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